Articles

(April 2006) The debate about health care in Pennsylvania centers squarely on policies that regulate and otherwise influence the costs, quality and access to health care for those who live here. Often lost in the discussion is state government’s role in the system as one of the largest purchasers of health care services. IssuesPA examined the figures.

State government spent more than $18.6 billion in state, federal and other funds on health care in fiscal year 2004-05. About $10 billion came from state sources, including the state’s General Fund, the Tobacco Settlement Fund, and the Lottery. The remaining amount is federal money.

So where does the money go?

State funding for health care pays for a variety of health care-related functions such as providing employee benefits, buying insurance, paying medical bills directly, subsidizing services and product purchases, running institutions, and overseeing the system.

Far and away the biggest buyer of health care services in state government is the Department of Public Welfare. The Medical Assistance (Medicaid) program consumes most of the money and also grabs most of the attention. Medical Assistance insures access to comprehensive health care services for low-income individuals and families. Nearly $14 billion went to Medical Assistance in 2004-05 from all sources, including over $4.2 billion in state taxpayer dollars. The state’s share of this program continues to be a major concern to state officials because it’s a large – and growing – portion of the budget.

Pennsylvania uses state money, income from the lottery and tobacco settlement proceeds, to help pay for the health care needs of the elderly, especially those with lower incomes. The largest portion, plus Federal funding through Medicare Part D, helps lower the cost of prescription drugs for low income elderly through the PACE, PACE-NET and PACE-Plus programs. Additional funding is available for personal care at home and other services.

The Department of Health spent $828 million in state and federal funds on a variety of functions including health support services, preventive health, treatment services, and drug and alcohol prevention and treatment.

The Departments of Corrections and Military Affairs use significant parts of their budget to provide health care in state institutions. The Department of Military Affairs spent $124 million supporting six veterans homes, The Department of Corrections spent $17 million on the health care of inmates in its system, and rising numbers of inmates – particularly aging inmates – means higher health care costs.

In addition to paying the direct costs of health care, Pennsylvania state government pays health insurance premiums for a large number of people. Over $300 million will be spent this year on premiums for children and adults in working families that don’t have insurance through their employer and don’t qualify for medical assistance. These programs will serve over 135,000 children through the SCHIP and 38,000 adults through adultBasic. At the same time, state government provides health care benefits for state employees and retirees at a cost exceeding $1.1 billion annually.

What does all this mean?

Health care now accounts for 26.9% of the state’s General Fund budget and more than 36.5% of all state spending. At the same time, health care costs have been increasing faster than the overall budget and, therefore, have been major drivers of state budget policy for several years. Budget experts believe that, without some major change, this trend will continue and health care costs will be an annual budget nightmare for state policymakers. More money spent on health care means less spent on other priorities.

Bottom line? Ultimately, state government’s interest in the topic of health care goes far beyond its roles of system oversight and regulation. As a major buyer of services, state government should be concerned about the availability, quality – and cost of health care.